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OTTAWA, Oct. 23, 2012 /CNW/ - In order to help stimulate growth within
the Canadian Spirits Industry, Conservative James Bezan, MP for
Selkirk-Interlake, today introduced a private member's bill to reduce
federal excise duties on spirits by $1.00 per litre of absolute alcohol
(laa).

"Our Government has in recent years reduced the excise burden on both
beer and wine, and it's time we now did the same for the country's most
iconic products, "Canadian Whisky" and "Canadian Rye Whisky", said
Bezan.

The Bill would amend the Excise Act, 2001 by reducing the federal excise duty on distilled spirits from
$11.696 to $10.696 per litre of Absolute Ethyl Alcohol (LAA).

"The benefits of a modest reduction in excise duties on spirits would be
tremendous, including spurring new investment in plants and
infrastructure, help fund the opening of new export markets, and create
new demand for Canadian cereal grains such as barley, corn, wheat and
rye", explained Bezan. "I ask the Government of Canada to bring this
bill into force as soon as we have balanced our budget."

"Canadian Spirits producers are very appreciative of the efforts of Mr.
Bezan to reduce the very high tax burden imposed on them in Canada",
added Jan Westcott, President & CEO of Spirits Canada. "There are
really tremendous opportunities for growth for the Industry. All we
really need is a more competitive tax structure to unleash those
forces."

If enacted, the effective duty rate on spirits would be reduced from 20
cents per standard drink1 to 18 cents, versus comparable duty rates of 9 cents for wine and 10½
cents for beer.

____________________

1 A standard drink is a serving of 17 ml of pure alcohol and is
equivalent to a 12 ounce serving of 5% abv beer, a 5 ounce serving of
12% abv wine or a 1½ ounce serving of 40% abv spirits.

Canada Beverage Alcohol Excise Duties

Summary

Canada imposes federal excise duties on beverage alcohol products sold
in Canada. The duty rates for spirits and wine are established under
the Excise Act, 2001, while beer rates are set under the Excise Act.

Current Rates

Current duty rates vary by alcohol category with product categories
defined by various characteristics including its agricultural
feedstock, manufacturing method, and alcohol content.

Product Category

General Duty Rate

Beer >1.2% abv, ≤2.5% abv

$0.1561 per litre

Beer > 2.5% abv

$0.3122 per litre

Wine >1.2% abv, ≤7% abv

$0.2950 per litre

Wine > 7% abv

$0.6200 per litre

Spirits ≤7% abv

$0.2950 per litre

Spirits > 7% abv

$11.696 per litre of absolute alcohol

Note: no wine duty imposed on wineries with sales less than
$50,000/year.

Historical

A number of changes to Canada's excise duty structure were introduced in
the 2006 federal budget. These measures included rate increases for all
categories to recover estimated lost federal Treasury revenue on
beverage alcohol sales as a result of the reduction in the GST rate
from 7% to 6%. Additional changes included,

1)

a sliding scale reduction in excise duty rates on the 1st 7,500,000 litres of beer produced and packaged in Canada each year. For
beer products with an alcohol content greater than 2.5% abv, duty rates
are as follows:

Annual Production Increments (Litres)

Beer Excise Duty Rate Per Litre

From 0 to 200,000

$0.03122

Next 200,001 to 500,000

$0.06244

Next 500,001 to 1,500,000

$0.12488

Next 1,500,001 to 5,000,000

$0.21854

Next 5,000,001 to 7,500,000

$0.26537

On volume greater than 7,500,000

$0.3122

Note: similar rate reductions available on beer with an alcohol content
greater than 1.2%, but not more than 2.5% of absolute ethyl alcohol.

2)

an exemption from all excise duties on wines produced in Canada and
composed wholly of agricultural or plant products (e.g. grapes,
berries, other fruits, honey, dandelions, etc) grown in Canada.

Both the excise duty reduction for beer produced and packaged in Canada
and the duty exemption for wines produced from 100% Canadian-grown
fruits or grapes were introduced to "stimulate further growth within
the Canadian wine and beer industries."2

Further Changes

The definition for "beer" was amended, effective February 2008, imposing
a maximum alcohol content of 11.9% abv on beer products eligible to be
treated as beer for excise duty purposes so as to combat the
introduction of "imitation spirits".

Federal Treasury Revenue Effects

While spirits represented 24.9% of beverage alcohol sales in Canada in
2011, a marginal decrease from 25.0% in 2006, spirits today represent
over 44% of federal alcohol excise duties, an increase from 38.1% in
2006.

Category

Duty Paid (2006)

Share (2006)

Duty Paid (2011)

Share (2011)

Beer

$587,542,592

43.3%

$608,162,364

39.8%

Wine

$252,102,258

18.6%

$242,497,278

15.9%

Spirits

$515,865,628

38.1%

$676,859,621

44.3%

Total

$1,355,510,478

100%

$1,527,519,263

100%

Source: Public Accounts of Canada

Units of Measure

General beer and wine federal excise duties are applied on a per litre
basis, while excise duties on spirits with an alcohol content above 7%
are applied on a per litre of absolute alcohol basis making direct
comparisons somewhat difficult. The following chart summarizes federal
excise duties across alcohol categories on both a litre of absolute
alcohol as well as on a standard drinks3 basis.

Category

Duty Rate

Rate Per LAA

Rate Per Std. Drink

Beer

$0.3122/litre

$6.24

10½ ¢

Wine

$0.6200/litre

$5.17

9 ¢

Spirits

$11.696/laa

$11.696

20¢

Benefits of Spirits Excise Duty Reduction

It is expected that a reduction in federal excise duties on spirits will
help stimulate growth within the spirits industry by improving gross
supplier margins. Improved gross supplier margins, margins necessary to
fund all production, marketing and sales costs, are necessary in order
to: